Wills, Trusts & Estates Prof Blog

The death of a debtor joint tenant in a homestead extinguished lien

In Toma v. Toma, 163 P.3d 540 (Okla. 2007), the court held that an unexecuted judgment lien on the debtor’s interest in jointly held property did not survive the death of the debtor because under the common law, the debtor’s interest ceases to exist on the debtor’s death, even though the property was the debtor’s homestead until death and the lien could not be executed while the debtor held the property as homestead.

The court explained that the legislature did not change the common law when it provided that the lien could attach to the debtor’s homestead.

IRS cautions about trust arrangements presented as welfare benefits

The Internal Revenue Service has recently issued two Notices and a Revenue Ruling, urging taxpayers to exercise caution with regard to certain trust arrangements sold to small businesses as welfare benefits. The IRS has also identified some of these arrangements as listed transactions.

Below excerpts from IR-2007-170, irs.gov, Oct. 17, 2007, summarizing these issues:

In Notice 2007-83, the IRS identified certain trust arrangements involving cash value life insurance policies, and substantially similar arrangements, as listed transactions.  If a transaction is designated as a listed transaction, affected persons have disclosure obligations and may be subject to applicable penalties.* * * 

In Notice 2007-84, the IRS cautioned taxpayers that the tax treatment of trusts that, in form, provide post-retirement medical and life insurance benefits to owners and other key employees may vary from the treatment claimed.  The IRS may issue further guidance to address these arrangements, and taxpayers should not assume that the guidance will be applied prospectively only.

[T]he IRS also issued related Revenue Ruling 2007-65 to address situations where an arrangement is considered a welfare benefit fund but the employer’s deduction for its contributions to the fund is denied in whole or part for premiums paid by the trust on cash value life insurance policies.

Ohio Could Have Been the First!

It was recently brought to my attention by Stacey Reeh, one of my Estate Planning students during our discussion of the Oregon Death With Dignity Act, that a bill was introduced into the Ohio legislature in 1906 which would have authorized assisted suicide.

According to the Nightingale Alliance:

It provided that when a mentally competent adult was terminally ill or injured, his doctor could ask him in the presence of three witnesses whether he wished to die. If the answer was yes, three other physicians had to agree that the patient's condition was hopeless before he could be put to death.

Assisted Suicide in Oregon -- Why do People Request it?

Here are the reasons for the years 1998-2005 along with the number of people citing that reason:

• Fear of losing autonomy (207)
• Fear of decreasing ability to do enjoyable activities (206)
• Fear of losing control of bodily functions (138)
• Fear of loss of dignity (94)
• Fear of being a burden (90)
• Inadequate pain control or concern about (54)
• Financial implications (7)

See International Task Force on Euthanasia and Assisted Suicide, 8 Years under Oregon's Assisted Suicide Law.

Special thanks to Stacey Reeh (J.D. Candidate, Texas Tech University School of Law) for bringing this information to my attention.

More on Do-it-yourself Wills

Earlier on this blog, I discussed a recent Wall Street Journal article which discussed the ways in which a person may obtain a will via self-help.

David M. Goldman of the Florida Estate Planning Lawyer Blog in his posting entitled Do it yourself Wills? Good idea or not? (Sept. 26, 2007) detailed many of the reasons why self-help wills, just like self-help heart by-pass surgery, is not a prudent option.

Trustees’ refusal to make distributions was not reviewable

The beneficiary’s guardian filed a declaratory judgment action seeking a judgment that the trustees had the authority to make “tax motivated gifts” to the guardians of the beneficiary’s person.  The trust stated that the trustees may distribute principal if the trustees determine in the their discretion that a distribution would be in the best interests of the beneficiary.

The court dismissed the declaratory judgment action because the trustees’ stated refusal to exercise their discretion did not present a justiciable issue and affirmed the trial court’s holding that the action was not one to modify, vary, set aside or nullify any provision of the trust and thus did not invoke the no contest clause. Di Portanova v. Monroe, 229 S.W.3d 324 (Tex. App. 2006).

Special Needs CLE

The American Bar Association Section of Real Property, Trust and Estate Law and the ABA Center for Continuing Legal Education is sponsoring a Teleconference and Live Audio Webcast on November 6, 2007 entitled The Basics of Special Needs Planning: Protecting Your Clients Who Need the Most Protection.

Here is a description of the program:

Any estate plan may need to include special needs planning. It is one of the fastest growing areas of estate planning and one of the most important in terms of providing value and peace of mind to clients and their families. Knowing the common pitfalls to avoid and solutions to planning challenges is crucial to helping these individuals.

This teleconference and live audio webcast will highlight all you need to know if you work in the special needs planning arena, including:

• An overview of public benefits programs (SSI, SSDI, Medicare, and Medicaid)
• Government benefits planning
• Tax issues
• Trusts in special needs planning (types of trusts, drafting considerations, trust administration, discretion of trustees, instructions to trustees, and choice of trustee)
• Decision-making options (advance directives, guardianships)
• Resources for special needs planning

Do-it-yourself estate documents – the attractions and the dangers

In an effort to avoid costly legal services, many people have entrusted their estate planning needs to proliferating online companies. Using their services, clients receive a prepared will just a couple of days after filling out an online questionnaire about their last wishes. These companies include instructions about the signing, witnessing, and notarization procedures required by each state, and claim that they are keeping abreast of the newest legislative developments. Many young parents with limited resources find this process appealing. For example, a young father, who paid $70 for his will to LegalZoom states the following:

"I don't like lawyers. I think they're extremely overpaid[.]*** With all the services on LegalZoom, I don't see myself using a lawyer for anything, unless it's a lawsuit."

While utilizing non-lawyer services in estate planning may seem appealing, it raises issues of legitimacy and effectiveness of this practice. First, most of the companies utilize law students and other college graduates to prepare the wills. These individuals are prohibited by law from giving legal advice but can define legal terms and offer general legal information. Second, many seemingly straightforward cases contain large underwater stones. In one case, for example, stepchildren ended up paying $100,000 in legal fees to claim their inheritance; the reason is that their step-mother’s will left everything to her “children,” but she had never legally adopted her step-children.

Striving to make legal services more affordable for middle class families, one attorney started a business called Walk in Wills in a strip-mall next to a Target store. There is no initial consultation fee, and he charges a flat fee if a client does decide to prepare a will or a trust.

See Christine Larson, A Need for a Will? Often, There’s an Online Way, NYTimes.com, Oct. 14, 2007.

Special thanks to Deborah Letz (attorney, San Antonio, Texas) and Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

Contract did not preclude inter vivos gifts

The testator was a party to a pre-nuptial agreement in which she promised to maintain a will giving at least one-fourth of her “estate” to each of her husband’s three sons.

Before death, the testator created two irrevocable trusts of which she was the life beneficiary; the remainder beneficiaries were charities and two individuals.

The testator’s will gave her entire probate estate of less than $10,000 to her husband’s sons; the trusts were worth in excess of $1,000,000.

The court in Estate of Draper v. Bank of America, N.A., 164 P.3d 827 (Kan. Ct. App. 2007), affirmed the lower court’s dismissal of the sons’ suit (brought in the name of the estate), holding that the testator did not violate the pre-nuptial agreement which contained no restrictions on the making of inter vivos transfers.

Testator's gift to United Kingdom political party deemed void for insanity

Branislav Kostic executed a will in which he left approximately 8 million pounds (over $16 million) to the Conservative Party in the United Kingdom.  Kostic made this gift because he admired Margaret Thatcher.  He died in October 2005 at the age of 80.

Kostic's son, the primary beneficiary of an earlier will, was very upset about his dad's new will and thus contested the will on the ground that Kostic was "deluded and insane" when he executed his new will.

The son brought forth evidence that Kostic believed that Thatcher was a great leader and that she had the ability to save the world from "satanic monsters and freaks."  He also thought that his wife, mother, and sister were part of a "devilish organization."

High Court judge Launcelot Henderson ruled that this evidence was sufficient to show that Kostic was not of sound mind and thus his son, Zoran, could take the estate as the beneficiary of a now unrevoked prior will.

See AP, ‘Insane’ businessman left millions to U.K. party, MSNBC, Oct. 15, 2007.

Special thanks to Neda Jahansouz (J.D. Candidate, Texas Tech University School of Law) for bringing this development to my attention.

Michigan Caselaw Update

Robert P. Tiplady (Attorney at law, Dykema Gossett PLLC) has published his article entitled Trusts and Estates, 52 Wayne L. Rev. 1019 (2006).

Tiplady explains that: “[f]our decisions in the trusts and estates area were rendered during this Survey period. One decision concerned the permissible scope of the exercise of a power of appointment. Another concerned the effect of a principal's death on the completed actions of an agent under a durable power of attorney. The two remaining decisions concerned the rights of a pretermitted spouse and a surviving incapacitated spouse, respectively, to elect against the deceased spouse's estate.

Reserved power gave the settlor standing

The settlor of some chartiable remainder unitrusts retained the right to change the charitable beneficiaries, remove and replace the trustees, and to approve required annual accountings.

Three years after creation of the trusts, the court granted the settlor’s petition to remove the trustees but ruled that the settlor lacked standing to object to the trustees’ accounts because local law states that a “trustee or beneficiary” may initiate proceedings concerning the “internal affairs” of the trust.

The court in Patton v. Sherwood, 61 Cal. Rptr. 3d 289 (Ct. App. 2007), upheld the removal but reversed the dismissal of the objections holding that statutory language defining the beneficiary of a charitable trust to include any person entitled to enforce the trust applies to the settlor because of the retained power to approve accountings.

Anna Nicole Smith Update

According to Lawyer for Smith's Baby Wants Payment, MSN Movies News, Oct. 15, 2007,

The attorney who represented Anna Nicole Smith's infant daughter in the rancorous dispute over the starlet's body is seeking nearly $200,000 for his work.

Richard Milstein served as the court-appointed guardian ad litem for Dannielynn Hope Marshall Birkhead. He has filed paperwork in state court in Broward County seeking $198,493.98 from a trust set up in Dannielynn's name.

Attorneys for the girl's father, Larry Birkhead, and Smith's longtime companion, Howard K. Stern, say Milstein's bill would exhaust nearly the entirety of an estimated $200,000 remaining in the trust, though the girl could eventually inherit millions more.

Milstein claims that for over two weeks, he had to devote virtually all of his time to this case.

Birkhead and Stern's lawyers claim that the amount sought is unconscionable and that Smith's mother, Virgie Arthur, should pay part of the bill.

The hearing is scheduled for November 8, 2007.

Special thanks to Neda Jahansouz (J.D. Candidate, Texas Tech University School of Law) for bringing this development to my attention.

Estates & Probate Number 4 on Pro Bono Ranking

According to ABA statistics reported in The National Jurist, Sept. 2007, at 12, estates and probate is the fourth most popular area in which attorneys provide pro bono assistance.

Here is the ranking:

1. Family law
2. Business & corporate law
3. Consumer law
4. Estates & probate law
5. Elder law
6. Housing, including evictions
7. Criminal law
8. Civil rights
9. Public benefits

Rethinking the Wisdom of Living Wills

In her article Back Off! I'm Not Dead Yet, Washington Post, Oct. 14, 2007, at B01, Charlotte Allen describes her recent experience of going through breast cancer treatment while being constantly questioned about having a living will. Allen attributes the hospital staff’s ceaseless inquiries to a 1999 federal law, requiring healthcare facilities to educate patients about living wills.   She explains:

When I showed up at the hospital for some pre-surgery medical tests, one of the receptionist's first questions was, "Do you have a living will?" The form she gave me after I shook my head was as complicated as a tax return. There were numerous boxes for me to check specifying a range of conditions under which I might like to have a Do Not Resuscitate order hung over my hospital bed, whether I would want to be denied "artificial" food and water under some circumstances, what I thought about being taken off a ventilator, and so forth.

Furthermore, I found something weasely in the way all those options were presented, as though my only real choice were between being dispatched into the hereafter at the first sign of loss of consciousness or being stuck with as many tubes as needles in a voodoo doll and imprisoned inside a ventilator until global warming melts the ice caps and the hospital washes out to sea. I found the box on the form that said "I decline a living will" and checked it. * * *

[W]hen I contemplate the concept of "dying well," I can't avoid the uneasy feeling that it actually means "dying when we, the intellectual elite, think it is appropriate for you to die." * * *

The problem is that nowadays there is simply no societal agreement on how people who are sick or disabled beyond hope of cure ought to be treated. Many people, especially highly educated, nonreligious people, think that "physician-assisted death" is exactly the right way to go -- or to send off your unconscious mother. If you think that bioethicists will erect safeguards against this sort of thing, think again.

As far as I can tell, bioethicists exist for the most part to do some moral chin-pulling before giving the green light to whatever consensus the rest of the elite have reached. * * *

Living wills, it would seem, are effective only if they happen to comport with doctors' and bioethicists' own theories about what is best for the patient anyway. For this reason, the authors of the Hastings study propose that instead of filling out a living will, people execute a durable power of attorney, a simple document that entrusts decisions about end-of-life care to a relative or friend who shares the signer's moral beliefs about death and dying.

Allen also discusses the increasing popularity of physician assisted suicides. This method of “good death” is now legal in Oregon and is in effect endorsed by former opposition, American Academy of Hospice and Palliative Medicine. Personally, Allen is not in favor of having a living will, and when the time comes, she does not want to "die well,” just die in peace.

Cy pres applicable although the beneficiary caused the impossibility

The donors created a perpetual trust to create and maintain a flower garden at a specific site in a city park as a memorial to a family member.

More than thirty years after donors’ deaths, the city removed the garden to make way for an economic development project and asked the court to modify the trust by allowing the city to recreate the garden at a nearby site.

In an opinion thoroughly examining the law of cy pres in Iowa as codified by statute, the court in Kolb v. City of Storm Lake, 736 N.W.2d 546 (Iowa 2007), held that the trust terms did not prevent the application of cy pres, that the trust was charitable, that the donors had a general charitable intent, that carrying out the original terms of the trust had become impossible, that the city’s actions created the impossibility but that the city’s actions were “natural and unavoidable” given the importance of economic development and that cy pres was therefore appropriate.

IRS Proposes Regulations on Patented Tax Methods

Proposed regulations would require taxpayers to report to the IRS when they use patented tax methods.  Reg-129916-07.

Mediation Clauses in Wills & Trusts

Lela P. Love (Professor of Law and  Director, Kukin Program for Conflict Resolution and the Cardozo Mediation Clinic, Cardozo School of Law) and Stewart E. Sterk (H. Bert and Ruth Mack Professor of Real Estate Law, Cardozo School of Law) have recently posted on SSRN their article entitled Leaving More than Money: Mediation Clauses in Estate Planning Documents.

Here is the abstract of their article:

When probate disputes arise, an increasing number of courts have been referring those disputes to mediation. Estate planners, however, have been less proactive about drafting wills to include mediation clauses that would anticipate estate disputes and channel them away from litigation. When a will mandates mediation, the will provides a dispute resolution mechanism designed to preserve family harmony, conserve estate assets, and avoid airing the family's "dirty laundry" -- objectives common to many testators.

Mediation clauses in wills are no panacea. They are of little value to testators who exalt control over estate assets above all other concerns, and they are unlikely to bind disappointed family members whose primary claim is "against the will" rather than "under the will." Nevertheless, compared to other alternatives frequently employed by estates lawyers (including "no contest" clauses), mediation clauses present significant potential for reducing estates litigation, with its attendant financial and emotional costs.

Continued Uncertainty in the Estate Tax Law Calls for Creative Planning

While many were hoping that the estate tax was facing its final days, it is becoming evident that it is likely to survive. The question remains, however, as to what shape it will take several years from now. Some of the areas of uncertainty include the amount of exemption and the tax rate applicable to the non-exempt estate. The current federal exemption is two million dollars per person. It is supposed to rise to $3.5 million, disappear in 2009, and then reappear as low as one million dollars in 2011.

The continuing flux in the federal tax exemption area mostly affects individuals whose estates are worth between one and five million dollars. To deal with the uncertainty of the future, these individuals have often been advised to utilize the following techniques:

• Disclaimers
• Allowing heirs flexibility in decision-making
• Giving money to family members during testator’s lifetime
• Grantor-retained annuity trust (GRAT)

See Rachel Emma Silverman, Families Rethink Their Estate Plans, Wall St. J., Oct. 10, 2007, at D1.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

New York Developments

Terry L. Turnipseed (Assistant Professor of Law, Syracuse University College of Law) has recently published his article entitled Estates and Trusts, 57 Syracuse L. Rev. 1135 (2007).

Prof. Turnipseed explains that "[t]his Survey year there have been substantial developments in estates and trusts law in New York, including a handful of important legislative provisions and numerous noteworthy, interesting cases."

Top SSRN Downloads

Here are the top downloads from August 15, 2007 to October 14, 2007 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days:

Rank	Downloads	Paper Title
1	133	Speak Clearly and Listen Well: Negating the Duty to Diversify Trust Investments Jeffrey A. Cooper, Quinnipiac University School of Law, Date posted to database: August 10, 2007 Last Revised: October 14, 2007
2	123	Agency Costs, Charitable Trusts, and Corporate Control: Evidence from Hershey's Kiss-Off Jonathan Klick, Robert H. Sitkoff, Florida State University College of Law, Harvard Law School, Date posted to database: August 31, 2007 Last Revised: October 1, 2007
3	54	Why Did Trust Law Become Statute Law in the United States? John H. Langbein, Yale University - Law School, Date posted to database: September 12, 2007 Last Revised: September 23, 2007
4	43	Estate Tax Exemption Portability: What Should the IRS Do? And What Should Planners Do in the Interim? Mitchell Gans, Hofstra University - School of Law, Date posted to database: September 11, 2007 Last Revised: September 26, 2007
5	29	When Informal Adoption Meets Intestate Succession: The Cultural Myopia of the Equitable Adoption Doctrine Michael J. Higdon, University of Nevada, Las Vegas, Date posted to database: August 28, 2007 Last Revised: August 28, 2007
6	29	The Uniform Acts' Loophole in Fraudulent Conveyance Law Adam J. Hirsch, Florida State University College of Law, Date posted to database: September 15, 2007 Last Revised: September 26, 2007
7	24	Designating Health Care Decision-Makers for Patients Without Advance Directives: A Psychological Critique Nina A. Kohn, Jeremy A. Blumenthal, Syracuse University - College of Law, Syracuse University - College of Law, Date posted to database: August 31, 2007 Last Revised: September 25, 2007
8	15	SRI-Shibboleth or Canard (Socially Responsible Investing, That Is) Joel C. Dobris, University of California at Davis School of Law, Date posted to database: September 27, 2007 Last Revised: October 8, 2007
9	14	Dying to Be a Father: Legal Paternity in Cases of Posthumous Conception Ruth Zafran, Interdisciplinary Center Herzliyah - Radzyner School of Law, Date posted to database: September 12, 2007 Last Revised: October 7, 2007
10	12	International Perspective on Intestacy Practices: Lessons for India Siddhartha Shukla, National Law University, Jodhpur, Date posted to database: July 21, 2007 Last Revised: July 23, 2007

Yale Law Journal Pocket Part Seeks Wills, Trusts, and Estates Articles

The following is from a message I received from Lucy Wang, the Chair of the Yale Law Journal Pocket Part:

I am writing to let you know about our current Call for Papers on state law topics.  We are planning to publish two end-of-year issues focusing on recent developments in state courts and state legislatures, and thought your readers might be interested.  The Pocket Part is the online companion to The Yale Law Journal ( www.thepocketpart.org).  One of our goals is to bring critical focus to areas of lawmaking that deserve greater attention in the legal literature.  We are particularly interested in papers on will, trusts, and estates.  I've provided the text of our Call for Papers below; a pdf is also available here:  http://yalelawjournal.org/2007/10/05/callforpapers.html .

The Yale Law Journal Pocket Part is soliciting commentaries for two end-of-year issues: one issue will focus on new developments in state courts, and the other will focus on new developments in state legislatures. Our goal is to bring critical focus to an area of lawmaking that deserves greater attention in the legal literature, and we invite you to submit a commentary on a state law topic of your choosing.

Commentaries may explore a legal development at the state level that has not been extensively reviewed in legal scholarship and the popular press, or present a novel argument on a timely issue that has received attention.

Submissions should be no more than 1,500 words. We encourage authors to write in a style accessible to policy-makers and practitioners. For a detailed style guide and instructions for submitting your piece, please visit our website, www.thepocketpart.org, and follow the link for "Submissions."
   
The deadline for submissions for both issues is Friday, November 2, 2007.